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Mortgage and refinance rates are low in general, though some of them have increased since last Sunday. Now may be a good time to secure a low rate on a fixed-rate mortgage, provided you have your finances in order.
Mat Ishbia, CEO of United Wholesale Mortgage, told Insider fixed-rate mortgages are probably a preferable option to adjustable-rate mortgages now.
Previously, ARM rates would start lower than fixed rates, with the opportunity for your ARM rate to decline in the future. Currently, Ishbia said fixed rates are lower than adjustable rates, so you may want to lock in a low rate now.
Rates from Ad Practitioners LLC.
Rates remain at all-time lows, though some rates are up from last Sunday.
We’re showing you the national average rates for conventional mortgages, which may be what you think of as “standard mortgages.” Government-backed mortgages through the FHA, VA, or USDA can come with lower rates than those listed.
In general, mortgage rates are still at historic lows. Low rates are generally a sign of a struggling economy. As the US continues to confront the economic fallout from the COVID-19 pandemic, mortgage rates will likely remain low.
Rates from Ad Practitioners LLC.
Refinance rates on fixed-rate mortgages haven’t changed much since last Sunday, while ARM rates have gone down significantly.
With a 15-year fixed mortgage, you’ll pay off your mortgage in 15 years and you’ll pay the same interest rate throughout the life of your loan.
You pay less with a 15-year term than with a 30-year mortgage. It will take half the time to pay off the loan, and you’ll get a lower interest rate.
However, your monthly payments will be higher with a 15-year fixed mortgage than with a 30-year mortgage. As you are paying the same loan principal in half of the time, you’ll pay more per month.
With a 30-year fixed mortgage, you’ll pay down your mortgage over 30 years, and your interest rate will stay locked in for the entire term.
A 30-year mortgage comes with a higher interest rate than a 15-year term. While adjustable-rate mortgages used to have a lower interest rate than 30-year fixed mortgages, a 30-year term is now the better deal.
You’ll make smaller mortgage payments each month with a longer term than a shorter term. You’ll pay less per month because you’re spreading out your payments over an extended period of time.
However, the overall amount you pay in interest will be higher with a 30-year fixed mortgage than a 15-year fixed mortgage because you’re paying a higher interest rate for more years.
While a fixed-rate mortgage keeps your rate the same for the life of the loan, with an adjustable-rate mortgage, your rate will remain constant for the first several years then increase or decrease periodically. A 10/1 ARM keeps your rate the same for a decade, then your rate will change once per year.
A fixed-rate mortgage may be your best bet, even though you can still get historically low ARM rates. It may make sense to lock in a long-term low rate for 15 or 30 years instead of risking an increased future rate with an ARM.
If you’re thinking about getting an ARM, you should ask your lender what your individual rates would be if you chose a fixed-rate versus an adjustable-rate mortgage.
It could be a good time to secure a low mortgage rate.
You can get an all-time low rate on fixed-rate and adjustable-rate mortgages today. However, if you’re looking to get a mortgage or refinance, there’s no need to rush. Rates will likely remain low for months, if not years, so you have time to boost your financial standing. If you’re looking to get the lowest possible rate, take a look at these tips:
- Increase your credit score by making your payments on time. This is the most important way you can up your credit score. You may also look into paying down your debts or letting your credit age.
- Save more for a down payment. Depending on which type of mortgage you want, you may need between 0% and 20% for a down payment. The higher your down payment is, the better chance you’ll get an improved interest rate from your lender.
- Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. Your rate may be lower with an improved ratio. Most lenders want to see a DTI ratio of 36% or less. To better your ratio, pay down debts or seek ways to boost your income.
If your finances are in order, now might be a great time to get a mortgage or refinance and lock in a low rate.
Ryan Wangman is a reviews fellow at Personal Finance Insider reporting on mortgages, refinancing, bank accounts, and bank reviews. In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership.
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